Daily Rate Update: February 18th-21st

The National Association of REALTORS® reports that January Existing Home Sales fell 1.3% from December to an annual rate of 5.46 million units versus the 5.42 million expected due in part to a big decline in sales in the West. Gains were seen in the Midwest and South with flat readings in the Northeast. Sales were up nearly 10% from January 2019. Inventories continued to drop with just a 3.1 month supply, the lowest level since 1999.

The median existing-home price for all housing types was $266,300, up 6.8% from January 2019 ($249,400). Lawrence Yun, NAR’s chief economist, finds the outlook for 2020 home sales promising despite the drop in January. “Existing-home sales are off to a strong start at 5.46 million.” Yun said. “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales.”

The manufacturing received some positive news today with activity in the Philadelphia region surging this month. The Philadelphia Manufacturing Index surged 20 points this month to 36.7, the highest reading since February 2017. The survey’s current indicators for general activity, new orders, and shipments increased this month, suggesting more widespread growth while firms reported an expansion in employment. The survey’s future indexes indicate that respondents continue to expect growth in manufacturing activity over the next six months.

Americans filing for first-time unemployment benefits continues to hover near 50-year lows as the tight labor market continues to be a bright spot for the U.S. economy. Weekly Initial Jobless Claims came in at 210,000 for the week ended February 15. The four-week moving average of claims, which irons out seasonal abnormalities, fell 3,250 to 209,000. The numbers come after the recent strong Non-Farm Payrolls where employers added 225,000 workers in January.

Mortgage rates continue to hover just above all-time lows this week which will continue to be a tailwind for the housing sector. Freddie Mac reports that the 30-year fixed-rate mortgage rose four basis points this week to 3.49% with 0.7 in points and fees.

Sam Khater, Freddie Mac’s Chief Economist said, “We’ve seen new residential construction surge over the last few months, on pace to reach the highest level in more than a decade. This is a good sign for the inventory-starved housing market and is a promising indication for the spring homebuying season.”

The housing sector continues to build on recent momentum given the low mortgage rate environment coupled with a strong labor market. The Commerce Department reports that January Housing Starts fell 3.6% to an annual rate of 1.567 million units, well above the 1.390 million expected. December’s numbers were revised up to 1.626 million, which was a 14-year high, from 1.608 million. Starts were up nearly 22% from January 2019. Building Permits, a sign of future construction, jumped 9% from December to an annual rate of 1.551 million, above the 1.460 million expected.

Wholesale inflation pushed higher in January to the highest level in more than a year, reports the Labor Department. The Producer Price Index rose by 0.5%, well above the 0.1% expected while the annual rate advanced 2.1% from the 1.3% rise seen in December. The so-called Core rate, which excludes volatile food and energy, also rose 0.5% and above the 0.1% expected. One report doesn’t constitute a pattern in this low inflation environment, especially after last week’s tame Consumer Price Index data. The Fed’s favorite inflation gauge, the annual Core PCE, will be released next week and is running at 1.6%, below the 2% Fed target.

The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose 5bp to 3.77% last week with 0.28 in points while mortgage application volume declined. The report also read that the Market Composite Index, a measure of total mortgage loan application volume, fell 6.4%, the Purchase Index declined by 3.4% while the Refinance Index decreased by 8%. In addition, the MBA’s January Builder Application Survey showed mortgage applications for new homes soared 35% compared to a year ago and were up a whopping 40% month over month from December 2019.

The housing sector received some positive news today from builders as sentiment remains near a 20-year high due in part to low borrowing costs. The NAHB Housing Market Index fell one point to 74 in February while sentiment for builders in the South, the biggest region, was the highest on record. The NAHB reported that steady job growth, rising wages and low interest rates are fueling housing demand in a market that lacks inventory, particularly at the entry-level.

Manufacturing activity in the New York State region surged this month, reports the New York Federal Reserve Bank. The Empire State Manufacturing Index rose to 12.9 in February, double the 6.0 expected. Within the report, it showed that the new orders index shot up 16 points while the employment component saw a modest gain. The six-month outlook suggests that optimism about future conditions was somewhat restrained.

Home prices continued to rise in January as housing supplies declined, reports real estate brokerage Redfin. U.S. home-sale prices rose 6.7% year over year in January to a median of $306,400. Prices were up 0.7% month over month. Redfin went on to say that low inventory continues to lead to a crunch in many markets across the nation. “Every home is getting multiple offers, often going for substantially above the asking price,” said San Fernando Valley Redfin agent Robert Iles.